Apple without Steve Jobs

Commentary: What's it worth to you?

By

DavidCallaway

SAN FRANCISCO (MarketWatch) -- Shareholders of Apple Computer Inc. put down their holiday iPod nanos for a moment this week and glimpsed a Christmas yet to come without Steve Jobs -- and they didn't like what they saw.

An unconfirmed report in a legal newspaper that said Jobs had retained his own legal counsel amid the ongoing investigation into Apple's use of backdated options triggered a 5% drop in Apple shares
AAPL, +0.42%
within minutes after trading started Wednesday. Indeed, the story on MarketWatch reporting the drop leapfrogged all other stories on the site to become the most-read piece less than 20 minutes after it was published.

By the end of the day, cooler heads had prevailed, and Apple shares had rebounded. Several analysts stepped forward to call the concerns were overblown, and the fact that Jobs had hired his own lawyer -- not confirmed by Apple -- was just the normal course of business. See full story.

Perhaps. But the scare did briefly unwrap worries among Apple's famously cultish users and shareholders of what the company and its stock might be like if for some reason the 51-year-old Jobs did resign or retire next year -- worries that were only amplified when Thursday's round of published reports suggested Jobs himself had been awarded millions of options at a board meeting that, in fact, had not occurred.

Are the shares, having tripled in the last two years on the power of the iPod revolution, still reflecting the phenomenal growth story of a reinvented company that changed the music industry like it did the computer industry 30 years ago? Or are they hanging by a thread on the future of a hard-charging, arrogant leader who could blow up at any time?

The answer depends on whether you believe Steve Jobs is Rupert Murdoch or Frank Perdue.

Is he an empire builder or a pitchman?

Certainly, anybody planning to go to Macworld in San Francisco next week to see Jobs preach to the masses knows that he's one of the finest pitchmen in corporate history. Whether he unveils the long-awaited "iPhone," as some expect, or simply touts new enhancements to existing products, the CEO clad in blue jeans and a black mock turtleneck is sure to put on a show.

But behind the pitch is an executive who clearly understands how to tap new markets and how to do it fast. Despite Murdoch's success in building a global news and information conglomerate, it took him years to realize the importance of the Internet.

Jobs' iPod, on the other hand, came out of nowhere and changed the music world overnight, even though it essentially was just another MP3 player with complementary software.

So whether you're a supporter or detractor of his, there's no doubting that Jobs, who underwent pancreatic-cancer surgery in 2004 that was called successful, represents a good portion of the gain in the value of Apple shares in the last few years. With the company set to unveil its annual report in the next two days, and with it a likely restatement of earnings and more disclosures about its probe into options abuse, the time to think about that value is now.

Wednesday's drop was a stark reminder that not every contingency is built in to the market, or discounted by the market. Surprises still move stocks every day, and even more so when those stocks are tech stocks. With Apple, multiply that by a factor of 10.

Surprises still move stocks every day, and even more so when those stocks are tech stocks. With Apple, multiply that by a factor of 10.

I don't know what Jobs' complete involvement in the options case was. Apple has said its own investigation showed that he never personally benefited from backdated options. So, as of now, I'd have to bet he survives the probe.

But if he doesn't, we're looking at about a 20% hit on the shares -- quickly -- as the market digests what Apple might be like without its leader (again).

Apple always has been a funny stock, subject to the rabid eccentricities of its user base. Jobs caters to that, and the shares carry a premium as long as he is at the helm. Without him, the company is still a major tech player. The vision, though, is lost.

Fortunately for Apple shareholders, this scenario remains unlikely in the short term. Yet Wednesday's scare serves as a useful reminder that even on your iPod, the music eventually runs out.

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